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NATURAL GAS STORAGE

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The EIA reported a withdrawal of 49 Bcf out of underground storage for the week ending February 9, 2024, vs. an estimated withdrawal of 71 Bcf.

Inventories are 2,535 Bcf, 255 Bcf or 11.2% more than the same period last year, and 348 Bcf or 15.9% more than the 5-year average.

NATURAL GAS PRODUCTION

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The cost of Natural Gas has been dropping like a rock and has hit near-record lows. One significant factor for this has been supply and demand. Supply has been especially favorable for a couple of months, with daily production near 105 Bcf. This comes after a shortfall in output after a cold front moved through, causing freeze-offs for natural gas well heads. 

PJM WEST FORWARD POWER PRICING

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Natural Gas Exports: 

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Demand has also been favorable over the last few weeks. As you can see in the chart above, demand for natural gas and power has dropped below last year’s five-year average. 

Mild winter weather means less demand for gas heating, keeping supplies high and prices low. Currently, $1.558 on prompt month (March) pricing

Weather: 6-10 DAY AND 8-14 DAY OUTLOOK

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The market is rarely in the moment, and market movement usually occurs based on what is expected in a week or two. The 6-10 day weather forecast shows a more robust warm front covering the Eastern half of the United States. This will keep demand low and will be less likely to affect production.

NYMEX CALENDAR STRIPS

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While prompt-month pricing is approaching historical lows, the 12-month pricing strip is also dropping into unheard-of territory. The markets have given up on any chance of a cold winter and are now projecting lower future months. 

As a result, we are seeing the 12-month structure, or average, approaching $2.50. The timing is right to execute some future hedges, especially next winter. New gas agreements are also relatively favorable.

ALL ABOUT THE NYMEX TWELVE-MONTH STRIP 

  • The NYMEX Twelve Month Strip is the average of the upcoming 12 months of closing Henry Hub natural gas futures prices as reported on CME/NYMEX.
  • A futures strip is the buying or selling of futures contracts in sequential delivery months traded as a single transaction.
  • The NYMEX Twelve Month Strip can lock in a specific price for natural gas futures for a year with 12 monthly contracts connected into a strip.
  • The average price of these 12 contracts is the particular price that traders can transact at, indicating the direction of natural gas prices.
  • The price of the NYMEX Twelve Month Strip can show the average cost of the next twelve months’ worth of futures.
  • The NYMEX Twelve Month Strip is also used to understand the direction of natural gas prices and to lock in a specific price for natural gas futures for a year.

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